EdInv/Dunstonh re Phoenix Endowment

scotti

Please would you cast your eye over the following and give me the benefit of your professional opinion.

Should I stay or should I go?

After reading all the negative feedback on this forum regarding Phoenix I would be grateful if you would advise me the best way to proceed regarding this policy.

Endowment policy (1989) originally with LAS (Life Assoc. Scotland) then taken over by Alba, now held with PHOENIX

Unit linked endowment (funds invested in Managed Fund)
Sum assured £30 000
Surrender value £12 920.21
Matures 2014
Premium 43.46
Current mortgage rate 6.24% (Bank rate + 0.99)

Projected maturity value (Phoenix expect middle rate to be most likely achieved)

Low 3% 18 500
Middle 4% 20 400
High 6% 22 500

With grateful thanks for any advice you can give me.

cheers, Scotti

dunstonh

I will take a look later as I am off out now but a quick comment would be that this is a good example as you have to look at each one individually and not rely on bulk comments. Many Phoenix plans are in obsolete, low protential with profits funds which are pretty awful. However, yours is in a unit linked fund and all those things you have read will not apply to you.

Projected maturity value (Phoenix expect middle rate to be most likely achieved)

I will take a look at the make up of the fund later but my gut feeling is that that is the wrong information to give you on a balanced managed fund. Its right for their with profits (in fact, i would use lower for their with profits) but with a medium risk unit linked fund they really ought to be using 4%, 6% and 8% on the projections in line with FSA requirements. This one may actually be understating the likely return. However, I will check that later.

Also, for compliance reasons, I do have to remind you that any comments made on the board give you no protection under the FOS. We can discuss and offer opinion but if you do something on the basis of what is written here, its your own fault if its wrong as you are making the decision.

scotti

Hi D

Just to clarify that the letter I received states

The Middle set assumes investments in

The Money Market Fund to grow at 3% each year
The Unitised With-Profits at 4%
Any other funds at 6%

The Lower set at 2,3 4 % respectively

The Higher at 4, 5, & 8% respectively


I do appreciate that your advice is in no way legally binding.

I just think it is terrific that there are people here who give their time and professional expertise to those of us who don’t have the first clue about these things, but are able to make a reasoned and intelligent decision given the information provided.

Thanks again for taking your time to take a look, it really is much appreciated.

Cheers, scotti

dunstonh

The rates they give are not always (more often than not) reflective of the investments you are in. The FSA state the rates that can be used. providers can use less than those but they cannot use more. They are guides only and not indications of what you will get back.

The LAS Managed fund managed 73% growth over the last 5 years. It is performing above sector average.

The last 5 years individually have had the following growth:

2007: 4.70%
2006:11.62%
2005:16.08%
2004: 9.82%
2003:18.11%

So you can see that just 1 year in the last 5 has fallen within the projection range.

Going back 10 years it has averaged 7.13% a year. 7-8% is the typical long term average you would expect on this type of fund if projecting forward.

fitzmum

Hi, I have similar policies with Phoenix

2 x 20, 000 'with profits' policies due to mature in September 2019. They were both taken over 20 years and our advisor at the time told us to take 2 x separate policies to cover the 40k motgage as that would be the best way of ensuring we would have a nice cash lump over at the end:rotfl:

We pay £55 a month (each) for these policies

The amount that the basic bonus is calculated on is £10874 and the last statement I have for the end 2006 shows a total bonus earned of 591.36 with only 28.59 added in the year 2005 - 2006

We were told that we would have a shortfall of 1600 on each policy in 2005 (if 4% was achieved - Phoenix expect this amount) so we went down the route of compensation which both Phoenix & the FSA turned down as they felt we hadn't lost out

So....if what you are saying is correct and we should see around 7% over the term then we are better off keeping these as they should pay out enough to cover the mortgage?? Yes?

dunstonh

Hi, I have similar policies with Phoenix

No you dont. Yours are with profits. The OPs are unit linked.

So....if what you are saying is correct and we should see around 7% over the term then we are better off keeping these as they should pay out enough to cover the mortgage?? Yes?

The OP has a "better" fund than you. Obviously no-one knows future returns but I would put the WP fund at 3-4% including terminal bonus as a guide personally. Most of the returns are likely to be in terminal bonus and not the annual bonus. So, make sure you look at that as well.

fitzmum

Thanks for your fast reply!

typical - ours would be the 'worst' one. Still, a shortfall of around 3k wouldn't be the end of the world.....i think we'll hang on to them.

scotti

Many thanks dunstonh for your input, its certainly given me food for thought, just need to up my savings plan for the shortfall but at least I will be a little less anxious.

cheers, scotti

dunstonh

Endowments were typically around 10% cheaper on monthly payments compared to repayment mortgages so a small shortfall at the end can often end up still being cheaper in the long run. (hows that for a positive spin?